Modern Life: Real Estate and Ridiculously Unaffordable Rents
When we moved out of the previous house we were renting — before buying this one and moving here in 2011 — we were paying $925 a month in rent.
It was a fairly spacious 3-bedroom/2 bathroom house, although fairly basic and sparsely outfitted, as far as amenities go. But it was a nice house, and we liked our time there.
So I noticed in our local paper that this same house is now up for rent... for $3,450 a month! That's almost a four-fold rise in 12 years!
Coming across this interesting small snippet wouldn't normally be of much interest to me except for the fact that we had previously lived in the house that was being listed. I already know that rental rates are ridiculous. However this idea that there has been a 300% rise in rents in the course of 12 Years was truly eye-opening.
Small wonder that there are so many economics editorials out in the world concluding that people simply can't afford to live anymore.
I suppose it would be one thing if median incomes also risen by 300% over the past 12 years but the truth of the matter — at least here in our county — is that they have been more or less stagnant for the past 12 years.
They used to be an old rule of thumb in mortgage lending that somebody looking to buy a house should be limited to their housing costs amounting to 28% — and certainly no more than 31% — of their income.
Such times are long gone. These days, there are lots of people who are spending as much as 50% (and more) of their available income on just their housing expense.
Meanwhile — because we do live in a tourist town — the available properties in the long-term rental market have drastically dropped because a huge number of property owners have decided that they would rather do short-term Airbnb rentals than rent to people long term with a longer term lease.
After all (at least from a financial standpoint) it makes more sense to collect maybe $200 a night for a good size house that many people can stay in short term — for a few days while they're visiting town — because it's significantly cheaper than a local hotel. You can collect a lot more money than from renting to somebody who's going to live there more or less permanently for $3,450 a month, even.
I have read recently that Airbnb — which is now struggling and coming apart at the seams a little bit — has been as much of a community destroyer as it has been a wealth builder for those who have had properties to rent out.
There's a bit of an irony in that (and we're seeing that first hand here in our town), which is that the people working in the hospitality industry and the local retail businesses — who usually work for only a little more than minimum wage — can't afford to live in town anymore because there's no place for them to rent, that they can afford.
Even if you had three people get together to share the rent and bills for that $3,450 3-bedroom house, if they had $12 retail sales clerk jobs, their share of rent alone at $1,150/month would eat up way more than 50% of their expected $1,800/month net paychecks.
So you end up with what is pretty much a lose-lose situation. I can't help but think that the property market is going to have a substantial wake-up call and correction in the not too distant future.
Maybe I'm just being alarmist but I have a feeling that a lot of people have their head in the sand with respect to the actual state of the economy here in the United States and probably in many other parts of the world as well.
Exactly when the wheels will come off the wagon... that remains to be seen.
Thanks for reading, and have a great remainder of your week!
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Created at 2023-12-08 00:32PST
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Wow, I had never thought of it that way — that AirBnB could be a community destroyer! That really is said. But the economics of it are exactly as you said. I have a good friend who owns a short-term rental in Minneapolis and it is a cash cow for her. And it’s great for people visiting the area. They have a place that is more like a home than a hotel, and they actually spend less and don’t have to go out for every meal.
But meanwhile, with this scenario playing out in cities and tourist towns across the globe, how do people get to know their neighbors?
Food for thought!
That’s a lot of money now. It is too expensive. Houses here are also expensive but not as much as that. Also, things have changed. The economy is no more like before…
It is even more crazy how some people’s salary did not change. How do they pay up?
Hopefully it pushes a lot of people into Van life, with Starlink on the roof and no fixed address. Good luck governing 100 million gypsies.